Those of us who were children in the 1950s and 1960s got so used to economic times getting better and better that we assumed that was the way the world would always be. Any slowdowns were just temporary glitches. In the early 1980s, when mortgage rates went through the roof, lots of my contemporaries cheerfully took out balloon mortgages because of course in five years they’d be making a lot more money. But, as a rule, they didn’t. Now I think most people have stopped expecting. They’re just hoping to hang on to what they have.The bolded section is what those on the Right -- arbiters of "supply-side economics," "voodoo economics," and "trickle-down theory" -- would like to pretend has nothing to do with economic growth. The principle is quite simple; pay workers enough to purchase what they produce, and the economy will grow. Mahablog quotes Rick Wolff:
I’ve believed for a long time that much of America’s prosperity — whatever’s left of it, anyway — has been floating on the wealth created in the postwar years. That’s when all those veterans got college degrees on the GI Bill and went out and started businesses or created new products. That’s when all those middle-class couples, booming with babies, bought their first houses with mortgages subsidized by the U.S. government. That left with them income to buy new refrigerators and cars and television sets, growing the refrigerator and car and television set industries in America. It was win/win for everybody. [emphasis mine]
From 1973 to 2005, this is what happened to the 80 percent of US workers in non-supervisory jobs. Their hourly wages — adjusted for inflation — rose from $15.76 to $16.11. That is, over a 32 year period, most US workers enjoyed a stunning 2 percent increase in what their hourly pay could buy. Because their work weeks shortened over those years, their real weekly pay — what they could actually afford for a week’s pay — actually fell from $581.67 to $543.65, a decline of 6.5 percent. This means that workers’ wages could buy less in 2005 than in 1973.Read the whole thing.
Over the same thirty years, US workers produced 75 percent more. In the language of economics, that’s how much output per worker — “productivity” — rose. Corporations got 75 percent more goods and services produced per worker. They sold that extra output and thus got much more revenue and profit per worker employed. Yet what they paid those workers did not rise. Stagnant wages did not allow the workers to buy any of the extra output they produced.
The numbers on productivity and real wages before then — from 1945 to 1975 — were very different. Productivity rose much faster then than afterward. But the big difference is what happened to real wages: hourly, they rose 75 percent from 1947 to 1972, while weekly they rose 61 percent. In other words, US workers wages then rose with their higher productivity — exactly what stopped happening after the mid-1970s.
The welfare state economy of 1945 to 1975 was driven by two interconnected fears: of lapsing back into the Great Depression and of succumbing to socialism. History reduced those fears enough so that, after 1975, business could undo the New Deal and go back to the pre-1929 gaps between rich and poor. Most paid commentators cheer the business reaction as if it were good for everyone, but workers suffering the new sub-prime economy may reckon differently. The explosion of workers’ debts has postponed that reckoning. So too have fundamentalism, escapism, and the noise from all those commentators.